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Buffett backs Bank of America, buying more stocks
Berkshire Hathaway chairman and CEO Warren Buffett walks to lunch during a break on the first day of the Allen and Company Sun Valley Conference in Sun Valley, Idaho July 6, 2011.
Credit: Reuters/Anthony Bolante
(Reuters) - Warren Buffett said on Friday he is still eager to buy companies and stocks, even as his conglomerate Berkshire Hathaway launches its first-ever share buyback program.
Buffett, in a CNBC interview, said the repurchases will not stop the company from making acquisitions or spending on infrastructure for its portfolio of companies.
The "Oracle of Omaha" also reiterated his support for Bank of America Corp even as he acknowledged it will take the bank time to solve its problems.
Buffett said Berkshire bought a net $4 billion of common stock on the market in the third quarter as sharp declines presented opportunities to invest cheaply.
But it is the investment in its own shares that stunned the market. Berkshire announced the program Monday, saying it would pay up to 10 percent above book value for stock. Investors said the program meant Berkshire was probably undervalued by 30 percent or more.
Buffett said the paperwork to start the buybacks was completed on Thursday.
Berkshire Class A shares were down 0.9 percent at $108,202 in afternoon trade on Friday, in line with broader market declines, though the stock is still up sharply from the pre-buyback levels of late last week.
BACKING BofA
While Berkshire has said it could spend heavily on shares, Buffett said on Friday the company would still make acquisitions and would end up spending $7 billion this year on plant and equipment for its portfolio of companies.
As he has all year long, he said such investments were a bet on the economic strength of the United States. "It's very, very unlikely we'll go back into a recession," Buffett said.
That confidence was part of his reasoning for the deal with Bank of America, which gave him a lucrative dividend and a pile of unusually long-lasting warrants as well.
Bank of America is "a fabulous business, but it's got a lot of problems from the past," he said, acknowledging that CEO Brian Moynihan will need years to fix them.
Bank of America is cutting 30,000 jobs in the first phase of an expense reduction program called "New BAC," a play on the company's ticker symbol. The bank is also shedding assets to raise capital to meet new industry standards that begin to take effect in 2013.
Buffett was on the NYSE floor to help mark the 50th anniversary of his portfolio company, Business Wire, yet he is also in New York to host a fundraiser for President Barack Obama, who has adopted his plan for the rich to pay a higher rate of tax than they do now.
Buffett -- who said the White House had asked for permission to put his name on the plan -- estimated that about 50,000 people nationwide would pay more taxes under the proposal.
(Reporting by Ben Berkowitz in New York, additional reporting by Joe Rauch in Charlotte; editing by John Wallace, Ted Kerr and Matthew Lewis)
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Berkshire should expand its focus and move some of the excess capital overseas to emerging markets, instead of buying back stock and keeping itself exposed only to the lagging U.S. economy.
Doesn’t make a lot of sense to me…to announce that you’ll be buying back shares before actually buying them back. Now he’ll have to pay up if he really wants to buy them back.
Almost as stupid as the Fed announcing exactly which T-bills they’ll be purchasing in the near future…before starting its purchase of them. Any chance the price of those long bonds went UP right after the announcement? Seems like just a gift of more profits to short-term bond traders. Is THAT the Fed’s strategy to boost economic growth? Put more money into traders’ pockets?
Let’s get real here people, Warren Buffet is not a friend of the country. Take a look at Berkshire Hathaway holdings and look at how many of their companies have sent jobs overseas or indulges in selling cheap crap made overseas to American consumers. Yeah, they’ve made profits, but in reality they may well be representative of everything wrong with the economy.
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